Correlation Between Johnson Chemical and Sports Gear

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Can any of the company-specific risk be diversified away by investing in both Johnson Chemical and Sports Gear at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Johnson Chemical and Sports Gear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Chemical Pharmaceutical and Sports Gear Co, you can compare the effects of market volatilities on Johnson Chemical and Sports Gear and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Johnson Chemical with a short position of Sports Gear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Chemical and Sports Gear.

Diversification Opportunities for Johnson Chemical and Sports Gear

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Johnson and Sports is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Chemical Pharmaceutica and Sports Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Gear and Johnson Chemical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Johnson Chemical Pharmaceutical are associated (or correlated) with Sports Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Gear has no effect on the direction of Johnson Chemical i.e., Johnson Chemical and Sports Gear go up and down completely randomly.

Pair Corralation between Johnson Chemical and Sports Gear

Assuming the 90 days trading horizon Johnson Chemical Pharmaceutical is expected to generate 0.83 times more return on investment than Sports Gear. However, Johnson Chemical Pharmaceutical is 1.2 times less risky than Sports Gear. It trades about 0.08 of its potential returns per unit of risk. Sports Gear Co is currently generating about -0.34 per unit of risk. If you would invest  6,950  in Johnson Chemical Pharmaceutical on October 7, 2024 and sell it today you would earn a total of  160.00  from holding Johnson Chemical Pharmaceutical or generate 2.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Johnson Chemical Pharmaceutica  vs.  Sports Gear Co

 Performance 
       Timeline  
Johnson Chemical Pha 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Chemical Pharmaceutical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Johnson Chemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Sports Gear 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sports Gear Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sports Gear showed solid returns over the last few months and may actually be approaching a breakup point.

Johnson Chemical and Sports Gear Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Chemical and Sports Gear

The main advantage of trading using opposite Johnson Chemical and Sports Gear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Chemical position performs unexpectedly, Sports Gear can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sports Gear will offset losses from the drop in Sports Gear's long position.
The idea behind Johnson Chemical Pharmaceutical and Sports Gear Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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